Assistance to Flood Victims Invites Further Disaster

The Federal Emergency Management Agency’s heavily subsidized National Flood Insurance Program is like a siren of Lorelei, luring people to abandon their common sense, damaging the environment and creating staggering liabilities for taxpayers. Congress’ generosity to this year’s flood victims will only confirm this mind-set.

A report in the Idaho Statesman on the spring deluge by the Boise River concluded that FEMA’s National Flood Insurance Program “has backfired--bringing more people into harm’s way” and has made risky development “look not only possible, but attractive.” Doug Hardman, Boise-Ada County Emergency Services coordinator, observed that subsidized flood insurance “did exactly the opposite of what it was designed to do. It has encouraged people to move there and encouraged developers to develop there.”

Scott Faber of American Rivers, a conservation organization, observed, “Prior to the 1960s, you didn’t have much development in flood prone areas because you couldn’t find any insurer crazy enough to underwrite it. But the federal government came along and said it is OK--and we are going to make it financially possible for you to live in a flood plain.” Now when floods occur, far more property is damaged than might otherwise have been the case if the federal insurance had not made it possible to build.

FEMA is pretending that merely shifting the cost of flood damage from a homeowner to taxpayers in general is almost as good as preventing a flood. The agency is running a national television advertising campaign (“Cover America”) urging Americans to buy into the flood insurance plan. FEMA director James Lee Witt declared last year: “The greater the coverage we can achieve, the healthier the flood insurance program will be, and there will be less of a burden on the disaster program.” But according to one agency analyst, “The way they advertise the flood insurance is disgusting. It is a Ponzi scheme--and they have to be [constantly] replenishing that sucker because it is running dry. The [flood insurance plan] is amazingly generous: You are talking of up to $250,000 for property damage coverage for only $300 a year for people living in a flood zone--that is absurd.” Private insurance companies in some cases would charge a $10,000 annual premium for an insurance policy that FEMA gives away for a few hundred dollars a year.

American taxpayers currently face more than $250 billion of exposure from government flood insurance policies. The insurance fund ran out of money last year and FEMA had to borrow $600 million to replenish it. Witt told Congress, “If flooding incidents drop to a more normal level, we expect that we will pay the fund back within five years.” Despite the red ink, Witt hailed the insurance plan in congressional testimony last month as “another governmental success story.” However, this year’s deluge of floods makes it clear that it is naive to expect the program to “get healthy” any time soon. Since FEMA is essentially massively subsidizing most of the people who buy the policies--the more policies FEMA sells, the greater the financial crash and burn will be when Mother Nature catches up with the agency.

The flood insurance program illustrates the hypocrisy of the Clinton administration’s environmental policy. Coastal wetlands and river flood plains are among the most sensitive habitats in the nation and are home to large numbers of endangered species. The Fish and Wildlife Service, in its expansive interpretation of the Endangered Species Act, has prevented many private landowners from building on their own lands when there is even a minuscule risk that some endangered bird or rat species a few miles away might be discomfited. Yet no private landowner has adversely impacted habitat for endangered species to the extent that governmental flood insurance has. Far more land has been paved over, built upon and bulldozed as a result of subsidized flood insurance than the amount of acreage controlled by any private real estate cartel.

Uncle Sam should get out of the flood insurance business. Individuals who choose to live in flood plains should no longer have their bad judgment subsidized by people living on mountain tops. And politicians should find some less environmentally damaging means of buying votes.